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When should companies lease or build a warehouse?

4 Posts
4 Users
Posts: 10
Topic starter
Active Member
Joined: 3 years ago

What are some of the considerations the companies need to look at to decide?

3 Replies
Posts: 19
Active Member
Joined: 3 years ago

If the business is a huge one which requires specific requirements, then building a totally new one may be the viable option. Otherwise, the more common option is to lease.

Building a new warehouse
1. Huge investment. Payback period is long.
2. Need to consider locality of site (for network connectivity to highway and ports).
3. Need to design and get various authority's approvals (time period for project may be long).
4. Different stakeholders involvement (internal and external).

Leasing of warehouse
1. Simpler than building a new warehouse.
2. Contractual period with landlord.
3. Investment upfront not as big.
4. However, the leasing rate is dependent on landlord.

Posts: 34
Eminent Member
Joined: 3 years ago

Another option is to outsource the warehousing part to 3PL. This means using the 3PL's space and manpower. It comes with a cost, but eliminate the headache of liaising with landlord. The company does not need to incur huge investment cost as well.

Posts: 25
Eminent Member
Joined: 3 years ago

Constructing a new warehouse will take at least a couple of years. A lot of time, effort and analysis need to be put into the project.

With the uncertainty in the economy, this may be challenging.


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